Insurers should examine Australian Financial Complaints Authority (AFCA) decisions to improve their own internal complaints processes and must make clear to consumers that disputes can be taken to the adjudicator, the General Insurance Code of Practice Governance Committee says.

Handling of disputes has come under scrutiny from the committee in its latest annual report, which says about 60% of complaints were decided in insurers’ favour after stage-two internal reviews.

Only about 56% of unfavourable consumer outcomes after that process ended up with AFCA, for reasons that are unclear, the committee says in its annual report.

“Subscribers’ internal complaints processes should be robust enough to encourage consumers and small businesses to refer their unresolved complains to AFCA,” it says.

The committee says AFCA resolves some 77% of complaints by agreement or in favour of complainants, a higher level compared with outcomes reached by insurers.

“If internal complaints processes are working effectively, the committee would expect to see greater alignment between complaint outcomes reached by subscribers and complaints resolved by AFCA,” it says.

It recommends that code subscribers ensure employees responsible for providing effective and fair review of complaints are well-training and competent.

“A critical element of this is using the outcomes of complaints from AFCA to improve these employees’ knowledge and understanding of products, claims processes, general insurance law and principles, and applicable consumer protection law.”

As reported by insuranceNEWS.com.au last week, code of practice breaches jumped to 31,186, last financial year compared to 13,668 in the previous 12 months, while the number of significant breaches has increased fourfold.

The two code standards most consistently contravened related to the handling of claims and complaints.

The governance committee report says it is scoping a targeted inquiry into travel insurance due to a rising number of declined claims, and will further investigate withdrawn claims in other retail classes.